By Jeff Fischer
We previously wrote about planned obsolescence, but now things have gone even further. Products aren’t just being designed to be obsoleted, but they are being intentionally engineered by manufacturers to self-destruct and take other parts with them.
America has been at a juncture in its evolution of Capitalism for some time. We’ve agreed to take a greedy detour that deviates from our roots of greatness and pride. Where this path will take us, we’re not sure, but we’re about to explore it.
Business by the numbers
Understandably, it’s a dynamic and challenging environment in which businesses now exist. Being a business owner today there are endless amounts of regulatory bodies with which to comply, filings to make and taxes to pay. That’s not even including creating a competitive product or service, bringing your products and services to market in a meaningful way and trying to create – and keep – an exceptional customer experience. Let’s face it, business ain’t easy.
Every business has a polarity to its financials: expenses and revenue. Every business also has a polarity to its revenue: new customers and existing customers.
If you want to grow a business’s profits, there are a limited number of ways to do it. Many are reputable and add customer value, but some are disreputable and have the potential of causing customers negative experiences and possibly injury or even death.
- Reduce expenses
- Increase new customers (revenue)
- Increase existing customer revenue
Most businesses want -really, need – to create exceptional growth. That’s why they’re in business and for publicly traded businesses, that’s the expectation of their shareholders.
Expense reduction is a limited short term limited gain, so businesses rightfully focus on revenue generation. If you’re a small business you have one sole mission – gain new customers. But, for large businesses with existing product lines and established market share, what are their options?
They either need to get very good at marketing and create innovative ways of differentiating themselves from their competitors with their existing product line or they need to bring entirely new products or product lines to market in an effort to gain more new customers. This often takes a long time (R&D) and comes at a great expense.
The most obvious and accessible option is to create more revenue with their existing, established, customer base.
To add value or create negative value
Designing your products to have planned obsolescence can be challenging given the fact that businesses have to remain competitive in their customer’s eyes to maintain market share. So, businesses have innovated new ways of obsoleting.
I’ll use my recent experience with brakes on a Hyundai Elantra as a prime example of business’ new and improved obsolescence strategy. Replacing the brakes on your car is one of the easiest, most economical and cost-saving updates you can do on your vehicle. So, I have a great deal of experience with brakes.
First, a little brake anatomy and physiology.
Image credit: How to Replace Disc Brake Pads
As you can see in the diagram, the pressurized brake fluid in the blue line coming into the piston expands the piston and causes the brake pads to apply friction to the brake rotor.
Image credit: How to Replace Disc Brake Pads
Most people know that if they drive on their brakes very long after they start hearing a squealing sound that they’ll be ruining their brake rotors. So you can’t drive very long after you hear that early warning or you’ll be looking at a much larger, more expensive project of not just replacing your pads, but the rotors as well.
But, what if Hyundai could design the brakes such that they could ensure that your rotors had to be replaced, not just your pads? If this were true, rather than offering their customers more value, they’re “offering” customers negative value, having them pay for replacing something unnecessarily.
What if Hyundai could make a very simple design change that would ensure that customers not only had to replace their pads but their rotors as well? If the vehicle is newer, then they’re almost ensured that the customer will bring it to the dealership to have the brakes done. Brakes aren’t something covered in a warranty and if the customer was deemed at fault, then neither would the rotors. This could be a windfall for Hyundai!
So, what is the early warning system people use to ensure that they don’t have to replace the majority of their brake system?
Here’s a recent picture from a 2013 Hyundai Elantra.
|Factory Brake Pads||After-Market Brake Pads|
That little shim of metal that extends beyond the hard metal backing of the brake pad is what makes the audible sound as the pad wears down to the last remaining protection from putting metal on metal.
The brake pad falling off of the backing plate wouldn’t have crossed my mind as odd, but when I was told that the front brake rotors had to be replaced under 60k miles, that’s what made me think twice.
I realized that the warning shim that makes noise had been reduced by ½ in size. It was made so small that the brake pad had failed on one side before the shim was even making any noise.
Rather than the normal squeal from the shim that you get, from a shim that’s the correct length such as the right photo, you just go immediately to metal on metal grinding sound and instantly start to destroy your rotors.
Money, Money, Money
Right about now, if you’re a Hyundai Executive, you should be seeing dollars signs in your eyes!
We’ve just created an innovative new way to Capitalize on all of our existing customer base in a whole new way. Existing, unsuspecting, trusting, customers who have been served well by Hyundai products in the past will buy a brand new car and be forced to replace their rotors on their very first brake pad replacement.
Not only does this offer the business revenue for the labor and materials for replacing pads, but a job that is 2-3 larger.
Here’s a breakdown from autoservicecosts.com for brake jobs:
|Brake Pads||$50 – $150||$100||$150 – $250|
|Rotors||$200 – $400||$150||$350 – $550|
|Calipers||$50 – $100||$100||$150 – $200|
Hyundai has successfully increased its brake pad replacement revenue from $250 to $800…an increase in revenue of 220%.
This is a clear financial win for Hyundai in the short term, but won’t this have side effects? Similar to the first law of thermodynamics, to the extent their shenanigans are known by their customers, their business is likely to receive equal and opposite backlash from their customers.
The Customer is Always Right
The phrase “The customer is always right” is the hallmark of American business and became representative of Capitalism ideals around the world. This simple phrase had the ability to make or break businesses of a bygone era.
Done right, a business would thrive off of their customer relationships. Done wrong, it could devastate a business overnight. Arguably, this phrase Made America Great.
Businesses took a strong stance that they were there to serve customers. The more the business provided value for the customer, the more businesses yielded the benefit of customer loyalty and goodwill for the business.
The Rise of Oppositional Capitalism
Like me, can you list a half dozen times in the last 12 months were you’ve been told you’re “wrong” as a customer?
Waited on the phone for 45 minutes on the phone only to be transferred 3 times? Tried to buy a countertop from Ikea only to wait for 1.5 hours to retrieve it from warehouse pickup? Have you been to the hospital and misguided about the real price of the service only to find out it costs 2-3x more than originally stated or labeled?
If you’ve experienced a scenario similar to this, then you’ve experienced Oppositional Capitalism. Businesses are now taking a clear stance that the customer is wrong. Businesses seem to only be willing to value the customer to the extent necessary. The bigger a business gets and the more cost-competitive a business is, in the case of Ikea, the less they seem to care about an individual experience.
Tell us your Oppositional Capitalism story in the comments.
The Abundance Capitalism Opportunity
In order to find our path out of the issues we’ve created, we must able to discern one type of Capitalism from another. For us to make those distinctions, we need adequate words we can use that will allow us to begin to articulate and reason about the problem. And so enters Abundance Capitalism.
Stephen Covey’s 7 Habits of Highly Effective People talks about win-win mentality vs. win-lose mentality:
When one side benefits more than the other, that’s a win-lose situation. To the winner, it might look like success for a while, but in the long run, it breeds resentment and distrust.
Stephen believes that when one side disproportionately benefits more than the other, that this results in win-lose. In the end, once customers become aware of a pattern of this win-lose behavior, they often are willing to purchase from another, more trustworthy and mutually beneficial company to purchase from. In this way, win-lose quickly becomes lose-lose because the customer loses just prior to the company losing the customer.
Businesses that want to build and maintain a customer base need to create win-win product and service offerings. These are the concepts buried in the roots of what Capitalism and historically thereby, America, great. In fact, it makes businesses, Capitalism, and even individuals great.
What do you think?
Do you think businesses care about their customers as much as they used to? Do you find yourself spending more on repairing and replacing items now than you did years ago? Please share your thoughts in the comments.
Jeff Fischer is a Software Engineer and Architect and Innovator who has a passion for philosophy, economics, healthy eating for the prevention and reversal of disease, and lifting weights. If you’d like to read more of Jeff’s writing, it can be found at his blog: Software Business Boot Camp
Kirby vac has just done this to us. Said their vac is “Not our problem”…
Capitalism is in the process of being replaced by Marxism. It’s been going on for a long time.
Marxism is the marriage of big business with big government. In Communism the Marxist marriage is big government owns big business. In Fascism the Marxist marriage is big business works with big government for their mutual benefit.
When I was young, it puzzled me to see all these big “capitalist” companies pushing left-wing Marxist policies. Now I realize they are Marxists, Fascists.
Big business complains about all the red tape and unnecessary rules and regulations, but behind your back they grin like the Cheshire Cat because all those rules and red tape protect big business from competition by start up companies that better serve customers. To the big business, those rules and red tape are like the bite of a big horse fly—hurts like the dickens, but the business can survive. But the same bite on a young mouse of a competitor can kill the mouse.
Of course, the loser in this is John Q. Public.
Marxism also favors the loss of morality. What I’ve read of Adam Smith, is that capitalism cannot survive without honesty. Adam Smith wrote from the milieu of Christian ethics, but when looking at the rest of the world, most places didn’t see the development of capitalism because of the lack of trust in business dealings. When Christian morality is attacked, capitalism is also undermined.
Under Marxism, you can’t even trust the food that you eat. This has come up time and time again in modern Marxist China. But we see Monsanto in partnership with big government doing the same here in the U.S.
Capitalism is largely dead in the U.S. and world-wide.
You can bet that Monsanto is also encouraging the importation of all of these invasive species that are crowding out the native ones, are toxic to livestock and can only be knocked back with their products. The human applicator will die long before the weeds do and soon the available ag lands will no longer produce. Seeing it in the midwest US now.
Thanks for a great article, Jeff!
It’s true, the bigger the corporation, the worse the service.
Not that it’s a product, but an example of bad customer service is the expanding policy of not checking an ID on an unsigned credit card. Retailers claim that it’s to speed up the check out process, and it does.
However, if it is a stolen credit card, the retailer STILL GETS PAID for the product. It’s just the victim of the theft who gets stuck.
This is typical of the attitude of big box retail in general – separate the public from their money for inferior, overpriced merchandise. Look at all the problems Apple had just a short time ago.
Buy local, buy USA, and shop smaller retail establishments and stop putting money into the greedy pockets of big business!
Thank you! Miss Kitty.
Being a small retailer is a tough go these days.
We “make-it” by doing the things the Big Boxers won’t even consider. We show people how to fix things and we try to know which products will not only last longer but will actually be repairable.
With all of the online or electronic Big Box retailers we must do better just to survive.
Locally we have won consumer preference awards five years in a row!
We really appreciate people like you and thank you once again.
You mention Apple. Yes, I have a love-hate relation with Apple.
I’ve worked in desktop publishing for many years. Apple has built into it certain advantages for desktop publishing that no other operating system has. Linux can be made to emulate most of them. Windows™ is a lost cause for most of them.
But the quality has been up, then down, back up, and under the latest company CEO, Tim Cook, going back down again. My latest Mac build quality is not as good quality as the one I got in 2011, which we’re still using for scanning, cleaning up scanned images, and streaming video to our big screen TV. And that was not as good quality as the Mac I got about 1995, that finally died at the age of 15 years when a capacitor in the power supply went bad (electronic components deteriorate over time) and fried the mother board. That old Mac cost more than a Windows™ machine at purchase, but ended up being cheaper in the long run because it lasted so long and at 15 it was still up to date, running the latest Mac OS and software.
But a hate relationship because of the actions of the company, and most recently those of Tim Cook. He is personally immoral. He uses the economic power of being the head of Apple to impose his immorality on others. In other words, he’s a little dictator. The last time I upgraded, because of Tim Cook’s actions I seriously considered buying a different computer than an Apple then loading it with Linux. My sister bought the competing machine that I almost bought, then had to depend on me with my Mac to deal with problems with her publisher, Linux also worked but Windows™ didn’t. Then her machine has been back for repairs while my Macs are still working. I hate the company, but feel trapped in that Macs are the only computers that do what I need them to do.
While my Mac is my main computer, it’s not my only computer. My tablet computer runs Windows™ 10 which I also use for certain software that is based on Windows™. It cost $185 when I bought it new. I also bought a low-end Dell for about $190 that came with Windows™ 10, but Windows™ was a disaster on it, so now it has Ubuntu Linux on it. I checked to make sure that Linux runs on it before purchase. That’s the machine I take on the road and I’m not worried about it being dropped, broken or stolen.
All the power cords that have come with my Macs, iPhones and iPod Touches in the last 10 years have gone bad, most commonly with the plastic insulation turning yellow, then peeling off. That’s poor quality. The cord I use to recharge my iPhone SE (the cheapest phone I then knew would work with my present cell phone service, I also like it’s physical size) has no exterior insulation left on it at all. Poor quality. The 2011 Mac is on its second power supply, and its cord is peeling its insulation after its first power supply completely lost its insulation. Poor quality.
Apparently all our laptop computers are now made in China. So we don’t have a choice there.
Unlike the old computers, none of the new computers are upgradeable, if you need an upgrade, you need to buy a whole new computer.
On the one hand, I want to love the company that makes the computers for my work. On the other hand I hate the company because of the actions of its CEO and its declining quality.
“All the power cords that have come with my Macs, iPhones and iPod Touches in the last 10 years have gone bad, most commonly with the plastic insulation turning yellow, then peeling off. That’s poor quality.”
Actually, it’s political correctness.
Apple signals its virtue by creating their cables with no PVC content whatsoever, and then bragging about it. Unfortunately, the result is a plastic that discolors, cracks, and eventually disintegrates.
The average American has two “weapons” in his/her arsenal – his/her vote AND his/her money. Unless backed against a wall, there are businesses I will not patronize. I do not pay any fees to my bank. Rarely eat at a chain restaurant but do frequent locally owned restaurants. I don’t use a credit card at locally owned businesses – cash money and an occasional debit card purchase.
Monsanto, actually Bayer these days as the name Monsanto is not a valuable marketing name these days, is a menace to the world. Trouble is they own too many politicians. Even if one’s local government is smart enough to ban the use of one of their poisons, Bayer/Monsanto tells one of their minions to put a stop to it. Dicamba is prime example – it drifts and was killing the crops/vegetation of OTHERS. Google Missouri/Arkansas for more information.
Interesting Apple issue re: cords. In all the years I’ve owned Mac products (starting back in the 80s, yes I am not young lol), I’ve never had any cord issues. Quality control is a thing of the past. IMHO, while “cheaper” to mfg overseas (slave labor/almost slave labor and zero rules), the US gets ripped off – products aren’t really less expensive (Mattel mfg Barbie’s overseas – price did not drop). Intellectual and real property gets stolen (EZPainter – now Shurline – mfg in Hong Kong) and the US company is now undercut.
Ugh. I’ll try to make a long story short. 😉 Going to name the company because they deserve their bad press.
We finally had an opportunity to upgrade to leather furniture. So I went to Macy’s because they had a lot of choices and I was being picky. Found just what I was looking for. But the floor model had a huge dent and the saleslady said it was just put on the floor and would go away. Well, we were going to have a special party and wanted everything just so. Loveseat arrives first but sent back with unsatisfactory leather and was replaced with a decent one. (DH knows leather) Every last sofa they brought was defective in someway and sent back to the warehouse. They came bubble-wrapped from China and were not inspected until they were in our driveway. All the sofas were sent back and the party date was quickly approaching. So they accommodated us with the defective floor model. I stuck an extra large pillow over the dent for the party. Well, they kept sending defective sofas until they said they were waiting for more from the manufacturer. The 6-month deferred billing date was fast approaching and so I called for an update. Was told that they were no longer making that sofa but I could have the floor model for free if I would just waiver the warrantee. So I signed what they sent for me to sign and all seemed as it should be. (loveseat was already paid for) Lo, and behold, they sent me a bill for it. We went round and round for years. Finally got someone to send me a copy of the thing I’d signed. It was a two page document instead of the half-page document I’d signed. They had cut and pasted my signature onto an entirely different document! No wonder I wasn’t getting anywhere! The lady who cut me the deal, “no longer works here.” After several years of going round and round with debt collectors patiently listening to my story, the calls stopped. In the end, I got a bill for the taxes that needed to be paid to the government. Went ahead and paid that. But, I’ve done my best to advise all my friends to not patronize Macy’s.
It was just a plain ol’ dirty trick. It’s usually our policy to shop Mom N Pop locals as much as possible. So we’ve gotten real strict with ourselves not to shop The Big Guys. Their volume is so huge, they just don’t care if you’re right and they’re wrong.
Learned my lesson about being so picky and wanting oodles of choices.
Forgot to say that all the delivery guys agreed, “Yeah, lady, you don’t want this.”
Businessmen cheating customers is not new or peculiar. During the American Civil War, businessmen were selling sanded flour and shoddy shoes and rotten horse harnesses. Today there are Chinese businessmen selling fake (plastic) rice and fake (plaster and chemicals) eggs. (Side comment: i never see prepping sites discuss the possibility of being sold fake or adulterated food after SHTF.) The urge to Get Something For Nothing is the curse of mankind and it is not new or peculiar to modern times. It explains everything, from slavery, to unfettered illegal immigration, household appliances that break after a few uses, or a soldier getting electrocuted in the shower by a shoddily-wired barracks building. Somehow, despite the lack of honesty and integrity, capitalism survives, and has for centuries, despite man’s natural desire to cheat other people and give them less than they paid for. I suppose it survives because there’s no better option.
I bought a 2008 Pontiac Solstice. I kept the oil changed every 3k miles, garage kept, washed twice a week. Never missed any routine maintenance. About 96k miles, started having the engine light come on. Put the computer on, it’s kicking out codes for emission system stuff, welcome to the cascade of bad sensors. Does the code tell you which one? Of course not, you have to go down the line sensor by sensor replacing them all. OK, so you go to the dealership right? They run up $1400 in labor, return the car and the check engine comes back on in 2 days. Back to the dealership, another $1400 in labor, same thing. Then oh, you need a new engine…just as it goes over the powertrain.
I called all the way up to Sr. GM managers and they all basically said to stuff it. I told them after 3 generations of GM buyers, I’d never buy another. Cost to me $38k. Cost to them $260k+…in lost sales.
Even the Solstice GXP and the rare targa top were under $30k. I’m going to have to say… Nope.
And it sounds like you went to an idiot dealer trying to take advantage of you. If you plug in an MDI it will interrogate every device on the bus and find what is bad.
Most of the emissions systems with those cars had issues with the evap system and was related to either a bad solenoid or gas cap.
A large multinational co I worked for Said: The customer is NOT always right, but they are always the CUSTOMER. Your job is to be smart enough to figure out how to take care of the customers problem with resources available. DO NOT quote them “terms and Conditions.” I see that is starting to fade in our current society, replaced too often by “It’s not my problem.”
It used to be that customers would intentionally buy from a business that provided excellent customer service, etc. But in today’s internet environment that is no longer the case. Customers will always choose the lowest price when they can and next is buying from whoever has the biggest advertising budget (thousands of dollars wasted on Google ad words to get one customer, while the rest click your link and then buy from Amazon, you must be almost willing to give your product away to win customers (unless you are selling something you and only you make). There is so much competition because of online shopping (and everyone and their grandmother has a website or a blog) that everyone takes home a smaller slice of the revenue pie, not to mention competing a lot of times with the manufacturers also which makes it even harder for someone to sell a name brand product and not be undercut from the place they buy from.
When I started selling online Amazon was just a bookstore and our online business had to work until 3 – 4 in the morning during the Christmas season just to get the orders out to our customers. Fast forward to 2019 and Christmas is now just like the rest of the year. I tried to play the Google ad words game but it cost me more than I made so it wasn’t worth the investment. Bezos tries to pretend he was just a small bootstrap startup in a garage but that is just the persona he adopted. The reality is he had a lot of investors and a lot of money to throw at becoming the top dog online. He still does.
Adding we worked like dogs during the Christmas season and gave up visiting family for Thanksgiving and Christmas just to get orders to our customers in time for their Christmases. Most of those customers have gone on to shop elsewhere and looking back I regret missing out on 15 plus years of holiday celebrations with my own family. If I could do it all over again I would have closed from December 20th through the New Year.